Oil prices ticked up on Wednesday as a massive drawdown in U.S. crude inventories countered persistent concerns about the coronavirus pandemic continuing to hurt fuel demand.
U.S. crude oil stocks dropped by nearly 10 million barrels last week to their lowest since March at 476.7 million barrels due to a sharp drop in imports, the Energy Information Administration said, compared with analysts' expectations in a Reuters poll for a build.
Stocks at the U.S. storage hub and delivery point for crude futures in Cushing, Oklahoma, plunged by 2.3 million barrels.
"The market was led up by a significant draw in crude oil," said Andrew Lipow, president Lipow Oil Associates in Houston.
Oil prices have recovered from record lows in April due to rising demand from the early months of the pandemic, particularly in China, and huge supply cuts by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+.
"Oil continues consolidating," said Jeffrey Halley of brokerage OANDA. "The Saudi Arabian cuts, OPEC+ compliance above 85% and an insatiable demand from Asia means that oil has seen its cyclical lows for 2021."
Prices could also benefit from lower U.S. oil production as a result of stricter industry regulations by the Biden administration, which is set to pause new oil and gas leases on federal land and cut fossil fuel subsidies as he pursues green policies.
"We're going to be watching these production numbers to see if U.S. oil producers can overcome a tougher regulatory environment and a tougher funding environment and raise output," said Phil Flynn, senior analyst at Price Futures Group in Chicago.
The number of global coronavirus cases has surpassed 100 million as infections rise in Europe and the Americas, while Asia scrambles to contain fresh outbreaks, weighing on oil demand and prices.
China, the second-largest oil consumer, has recently seen a coronavirus resurgence, but official Chinese data showed 75 new confirmed cases of COVID-19 on Wednesday, the lowest daily rise since Jan. 11.
After the U.S. oil inventory report, the market's focus shifts to the results of the U.S. Federal Reserve's two-day policy meeting. Analysts expect the Fed to stick to its dovish tone to help speed the economic recovery.